Greece into a debt crisis, the situation in other European countries how they can do what they do Tags: European UnionGreecedebt crisis EuropeLaunchesaMassiveGreekBailout
European launch large-scale emergency rescue plan GreeceGetsNewBailoutasU Greece . S. NearsBrink
Greece, the United States to obtain relief bankruptcy BRUSSELS-Euro-zoneleadersagreedThursdayonanew109billion ($ 157billion) bailoutforGreeceandnewstepstopreventitsdebtcrisisfrommetastasizingacrosstheContinent-inaplanexpectedtotriggerthefirstdebtdefaultbyanationusingthecommoncurrency.
Thursday, the euro zone leaders on a The new 109 billion euros ($ 1,570) of the Greek emergency plan and how to take measures to prevent the transfer of the debt crisis to other European countries to reach agreement, expected that the program will trigger the use of a unified currency, the euro countries, the first debt default. Themeetingalsoproducedastarkandopen-endeddeclaration: Thewidereurozoneiscommittedtofinancingcountriesthattakebailouts-thusfar, Greece, IrelandandPortugal-forasalongasittakesthemtoregainaccesstoprivatelenders.
The meeting also issued a public statement: dedicated to the entire euro zone countries for emergency assistance to provide financial support until it can regain the private loans up to the countries currently receiving assistance, Greece, Ireland and Portugal. ThemoveisaboldbidbyEurope leaderstocorralan18-month-olddebtcrisisthatisveeringdangerouslyoutofcontrol. MarketsstoppedlendingtoGreece, thenIreland, thenPortugal.FearfulthatpolicymakershavenoconcretestrategyforshoringupthelargereconomiesofSpainandItaly, investorshavelatelysouredonthemaswell.Aftermonthsofdithering, Europeanleadersresolvedthattheyhadtostopthebleeding.
Has lasted 18 months, the debt crisis facing the danger of out of control, this is the European leader for the debt crisis and to take control of a bold move. Market has stopped, respectively, to Greece, Ireland and Portugal to provide loans. Fear of decision-makers can not come up with specific strategies to support Spain and Italy, two larger economies, investors, policy makers have recently begun to feel disappointed. After months of indecision, European leaders decided to take measures to stop bleeding. Still, itremainstobeseenwhetherthetourniquetwillhold.Evenafterthenewplan, Greecewillhaveastaggeringloadofdebt.
Pressure, however, remains to be seen whether the tourniquet. Even if the new scheme is implemented, Greece will continue to face huge debt burden. Thursday agreementwasthefruitofseveralconcessions. EuropeanCentralBankJean-ClaudeTrichetlostafighttopreventdefault.GermanChancellorAngelaMerkelpriedopenherreluctantnation pocketbooktowriteanothercheckandbeonthehookforstillmore.
Thursday agreement is the result of concessions by the parties, the European Central Bank President Jean-Claude Trichet to prevent breach of contract in the battle lost. German Chancellor Angela Merkel forced to open their own wallets, check out the other one, the future may also open more. FrenchPresidentNicolasSarkozy, thoughhelostabidtotaxbankstopayforthebailout, mayhavecomeoutthebestbyurgingMs.Merkeltoamoreproactiveapproachtothedebtcrisis.
While French President Nicolas Sarkozy failed to achieve through the tax to the bank commitment to provide emergency aid, but he might be persuaded to take Merkel more proactive measures to deal with the debt crisis, this may be the best results. Inadeclarationcraftedhereafterhoursofhaggling, andawhirlwindtripWednesdaytoBerlinbytheFrenchpresident, theleadersputforwardbillionsmoreinnewloanstoGreece.Buttheyextractedaprice: Greece private-sectorcreditorswillacceptabondexchangethatgivesthemlessthanoriginallypromised.
Through all hours of debate, as well as the rapid Sarkozy on Wednesday in Berlin, a statement reached by leaders of the euro area, proposed for Greece to provide billions in new loans. But they also made a condition: the Greek private sector creditors to accept lower than the promised bond exchange. Theeurozonehadlonginsistedthatnoneofits17memberscouldcontemplatenotrepayingitsdebt, andtheEuropeanCentralBankvigorouslyfoughtadefaulttotheveryend.Mr.TrichetjoinedMs.MerkelandMr.SarkozyattheirmeetinginBerlinonWednesdaytopresshiscaseoncemore.ButGreecewasreelingunderitshugeburden, anditswoeswerethreateningtoengulfothercountries.
Euro zone leaders have insisted that 17 Member States may not refuse to consider the debt, the European Central Bank are firmly until the last against members of the breach. Trichet joined Merkel and Sarkozy talks in Berlin on Wednesday, and reiterated his stand often, but Greece, under the huge burden of debt faltered, and it crisis could spread to other countries. Topushbackagainstthatcontagion, theeurozonealsoagreedThursdaytoawideexpansionofits440billionbailoutfund.Thatvehicle, oncerestrictedtolendingtocountriesnearthebrinkofcollapse, willnowbeabletobuyeuro-zonebondsonsecondarymarketstomovepricesandlenddirectlytocountriesevenbeforetheyloseaccesstoprivatefunding.Thatcouldevenincludelendingmoneytofinancebankrecapitalizations.
In order to curb the spread of the debt crisis, the eurozone leaders agreed Thursday to expand its 440 billion euros of emergency relief aid for the scope of the Fund was limited to the verge of collapse in lending to countries, but now you can buy euro bonds in the secondary market to drive prices, and can not lose in these countries before the private relief funds to provide loans directly, it might even include the provision of loans to help banks recapitalize. Theleadersalsoagreedtocuttheonce-loftyinterestratesthatthebailoutfundchargesandextendtoasmuchas30yearsthematuritiesoftheloansitprovides.
Euro-zone leaders agree to reduce the high rates of emergency payments, and extend the loan maturity to 30 years.
“Wecreatedasolidfirewallandbetterfire-brigadeequipment,” saidHermanVanRompuy, theEuropeanUnionpresident.Thatcreationhadbeenalongtimecoming.Inspringof2010, whentheeurozonewasdebatingthefirstGreekbailout, thecountries-atthefirminsistenceofGermany-decreedthatrescueloanswouldcomeonlywhenabsolutelyneeded, andwouldbeissuedatpunitiveratestodiscouragecountriesfromslackingonreformsandfallingbackoncheapaid.
Herman Van Rompuy the rotating EU presidency, said: “We have built a solid firewall, with better fire fighting equipment.” firewall construction of this road takes quite a long time. In the spring of 2010, when the first euro-zone on Greece to discuss an emergency rescue plan, the euro area member states issued a decree (in the strong insistence of Germany), the provisions of last resort is not for loan assistance, and the implementation of punitive interest rates, reforms in these countries in order to prevent omission or rely on other members of low-cost assistance. Germanyhasmadeastarkreversal.ChancellorAngelaMerkel, oncetheeurozone “MadameNon,” ledapushtoassemblethenewGreekbailoutprogram.InthefaceofstiffdomesticoppositiontocreatingwhattheGermanpressdubbeda “Transferunion,” sheopenedthedoortofargreaterfiscalaidthanhercountryhadoncecontemplated.Inreturn, shewonacommitmentthatbanksandothercreditors-andnotjusttaxpayers-wouldhavetobearsomeoftheburden.
Germany, there is a clear reversal of attitude, German Chancellor Angela Merkel once known as the euro area would only say “no” female prime minister, but now spearheading the development of the new Greek emergency rescue plan. The face of strong domestic opposition formed the German media called “over-Union”, she opened the door to the German offer was expected to be higher than economic aid. In return, banks and other creditors (not just the taxpayers) to bear some responsibility for her commitment.
ThenewplanforGreecewillworkasfollows: Theeurozone bailoutfundandtheInternationalMonetaryFundwilllendthecountryroughly109billionoverthenextthreeyearsataround3 .5% interest.
new rescue plan for the operation of the Greek system is: Euro Emergency Relief Fund and the International Monetary Fund in the next three years to Greece about 109 billion euros, about 3.5 percent interest rate loan PrivatecreditorswhoholdGreekdebtthatmaturesinthecomingyearswill “voluntarily” turnintheirbondsandacceptnewonesthatmaturefarinthefuture.TheInstituteofInternationalFinance, abankingtradegroup, saiditsmembershadcommittedtoparticipateintheexchange.
hold in the coming years due to Greek debt private debtors, will automatically return the longer-term bonds and accept the new bonds. Banking Institute of International Finance, said trade groups whose members have decided to participate in bond exchange. Thebanks, GermanyandFrance largestinstitutionsamongthem, offeredtotakenew30-yearor15-yearGreekbonds.Theofferincludesamenuoffourdifferentflavorsofbondswithvaryingcouponsandtypesofinsurance-somewouldbebackedbytriple-A-ratedcollateral.Someofthebondsonthemenuincludea20% discounttoprincipal.
Including Germany and France largest financial institutions including banks have decided to accept the new 30 or 15-year Greek bonds. Choice of four different types of bonds, the coupon and the type of insurance varies, some of which bonds are triple-A by the reputation of the collateral as well, the list of some of the principal amount of bonds up to 20% discount . Theeuro-zoneleaderssaidtheprivatesector “contribution” wouldamountto37billionthrough2014and106billionthrough2019, thoughitdidn detailthecalculation. Theyalsosaidadebtbuybackprogramwouldyieldanadditional12.6billionbytakingGreekdebtoffthemarketsatdiscountprices.
Eurozone leaders said the private sector contribution in 2014 will reach 37 billion euros by 2019 will reach 1060 million euros, but they detail the specific calculations. They also said that the debt buy-back program at a discount to some of the Greek bond out of the market, which will generate 12.6 billion euros of additional funding. CharlesDallara, chiefexecutiveoftheWashington-basedIIF, whichhasbeenleadingnegotiationsfortheprivatesector, saidhebelievedthedealshouldputanend “totheuncertaintyswirlingaroundthefuturethatwashinderinganycapacityfortheGreekeconomytogrow.”
Institute of International Finance in Washington, president of search 尔斯达拉罗 (CharlesDallara) has been representing the private sector to participate in negotiations, he said that at present about the future the uncertainties hindering the economic development of Greece, I believe this agreement will end this uncertainty. Thenatureoftheprivate-sectorcontribution-andhowitiscalculated-ismurky.Butitappearsthatarelativelysmallportionofitwouldcomefromactuallyrenouncingprincipalthecreditorsareowed.Alargepartwillcomefromacceptingtoberepaidlateatlowinterestrates.
Private properties and methods of calculating the contribution is not clear, but it seems a relatively small part of them from creditors, are owed to renounce the funds, mostly from the acceptance of low interest repayment in the future. Inanycase, theexchangewouldcauseratingscompaniestoplaceGreeceinto “selectivedefault”-atermindicatingithasdefaultedonsomeobligationsbutishonoringothers.Itisn clearhowlongGreecewouldremaininthatsituation.
In any case, this show will lead Greece into the rating “selective default” ranks, “selective default” means it default on some debt, but not in default on some debt, Greece is not clear how long the current situation will remain. Thathasasideeffect: TheEuropeanCentralBankhasmadeclearitwouldn acceptdefaultedbondsascollateralforitslendingoperations. Thatwouldbedevastatingtobanks-especiallyGreekbanks-thatrelyonusingtheirholdingsofGreekbondstogetquickcashfromtheECB.Tocounteractthat, theeuro-zonecountriescommittedtoproviding “creditenhancement”-guaranteesorothermeasures-thatwouldallowtheECBtocontinuetoacceptGreekdebt.
Its negative impact is: the European Central Bank has made clear that the bank loan breach of contract is not accepted as collateral, which rely on its holdings of Greek bonds from the European Central Bank the bank for quick access to cash is a fatal blow, especially the Bank of Greece. In response, the euro-zone countries decided to provide “credit enhancement” or other measures to ensure that the European Central Bank to continue to accept the Greek bonds. Mr.Trichet, theECBpresident, madeclearhewasareluctantparticipantinthearrangement.Buthesaidgovernmentswouldprovidesome35billionofinsuranceincasetheGreekcollateralisn solid.HeaddedthattheECB sownholdingsofGreekbondswouldbe “fullyandintegrallyhonored.”
European Central Bank president Jean-Claude Trichet made it clear that he would not participate in the agreement, but the euro-zone governments will provide 350 billion euros of insurance in case the Greek collateral instability. He also said that the European Central Bank own holdings of Greek bonds will be full and complete discharge. EuropeanleaderstookpainstoseparateGreecefromothercountries.Greece “requiresanexceptionalanduniquesolution,” theysaidinastatement.Othereurocountries “solemnlyreaffirmtheirinflexibledeterminationtohonorfully” theirownsovereignbonds, thestatementsaid.
European leaders took pains to separate Greece and other countries, they said in a statement, “requires a non-Greek The only solution with the unusual “, the other euro-zone countries solemn reiterated their firm determination to carry out domestic bonds. IrelandandPortugal, bothreceivingEuropeanaid, willgetbreaksontheirinterestratesto3.5%. ForIreland, whichwaspayingaround6% ontheEUportionofits67.5billionbailout, thatisavictory.PreviousattemptstoloweritsinterestratehadbeenstymiedbyFrenchinsistencethatIreland lowcorporatetaxrateberaised.Thatdemandisdropped.
Received European aid Ireland and Portugal will cut interest rates to 3.5% This is a victory for the Irish, because it received 675 million euros in emergency relief funds to pay the required interest rate is 6%. Ireland tried to lower lending rates, but did not succeed under the obstruction of France, the French insisted that Ireland should raise corporate tax rate is too low, but the French gave up this demand.